Loyal to Whom? The Effect of Relational Embeddedness and Managers’ Mobility on Market Tie Dissolution

Abstract

In this study we use a social embeddedness perspective to investigate the paradoxical role that individual-level embedded relationships have on the dissolution of interorganizational ties. Prior studies have found that managers who form close interpersonal relationships with clients can stabilize market ties, but these relationships can also be a source of increased market tie dissolution in the event of an exchange manager's departure from the firm. Using data on all state-level lobbyists and clients in the Texas lobbying industry from 2001 to 2009, we confirm that a client is more likely to remain with a firm than to follow a departing manager to a new firm, but the depth, focus, and shared ownership of a manager's client relationship moderate the impact of his or her mobility on market tie dissolution. We find that the tenure of the relationship with a manager, the number of clients on a manager's roster, the level of attention received from a manager, and the presence of an additional manager relationship at the same firm all influence where a client places its business when a manager departs. Our results suggest that embeddedness explanations strongly predict interpersonal market tie dissolution when managers are stationary but lose their predictive power when managers move to new firms. We propose that an alternative logic of interorganizational market ties, based on power and resource dependence, may be at play in such situations.

Employee Mobility and Interfirm Relationship Transfer: Evidence from the Mobility and Client Attachments of United States Federal Lobbyists, 1998–2014

“…Beyond the literature on labor market specialization, this study contributes to the broader literature on multiplexity and embeddedness by showing that the client retention benefits of multiplexity depend not just on the quantity of employees involved in multiplex ties (Bermiss & Greenbaum, ), but also on their human capital characteristics (i.e., specialization). At the same time, this study adds to the literature by drawing attention to the fact that the client retention benefits associated with multiplexity do not come without potential hazards.…”

“…My findings have significant and widespread economic implications, particularly in the context of professional services, a crucial and substantial component of the U.S. economy that contributed more than $2.2 trillion (∼20%) to the U.S. gross domestic product and was the leading source of U.S. private sector employment in 2011 (USITC Publication 4412). By examining the main and interactive effects of repeated exchange, multiplexity, and specialized human capital, this study empirically shows how individual, organizational, and structural relationship characteristics affect the likelihood that employee mobility results in client transfer, thereby contributing to our theoretical understanding of the multilevel nature of relationship attachment (Bermiss & Greenbaum, ) and the sustainability of human‐asset–based competitive advantages (Coff, ).…”

Will We Ever Meet Again? The Relationship between Inter‐Firm Managerial Migration and the Circulation of Client Ties

“…We define managers as the individuals at multiple hierarchical levels of organizations who contribute to developing and maintaining provider-client relationships (Broschak and Block, 2014;Fichman and Goodman, 1996). Prior research has established that managers' investments in human and social capital help provider-client relationships perform more smoothly and persist over time (Broschak, 2004;Seabright, Levinthal and Fichman, 1992;Uzzi, 1997), managers' migration to other providers disrupts social capital and increases the likelihood provider-client relationships will end (Bermiss and Greenbaum, 2016;Broschak, 2004;Broschak and Block, 2014;Raffiee, 2017;Rogan, 2014;Somaya, Williamson, and Lorinkova, 2008), and managers who migrate to other providers can appropriate relationship-specific social capital and facilitate the movement of clients to those same providers (Raffiee, 2017). In this line of research, the dominant perspective is that the career mobility of people affects market ties between firms (Mawdsley and Somaya, 2016).…”

“…Second, existing research often examines how managerial migration and the dynamics of provider-client relationships are related but overlooks which managers migrate and where they go. This is an important omission because many of these studies are conducted in settings where a single role captures the entirety of provider-client relationships; roles such as lobbyist (Bermiss and Greenbaum, 2016;Raffiee, 2017) lawyer (Carnahan and Somaya, 2013;Coates et al, 2011) and accountant (Wezel, Cattani, and Pennings, 2006). In other professional services, such as advertising and consulting, the service provided and relationships with client firms are more complex with responsibilities for delivering services and managing client relationships distributed among managers in different functional areas and at multiple hierarchical levels (Bermiss and Murmann, 2015;Fichman and Goodman, 1996;Mills and Margulies, 1980;von Nordenflycht, 2010).…”

“…When client firms enter into relationships with professional service providers, they largely purchase the knowledge, skills, abilities, and expertise of their managers. Over time, provider-client relationships become embedded in the social capital provider-side managers develop with client firms; in-depth understanding of, clients' needs (Bermiss and Greenbaum, 2016), relationship-specific expertise such as knowing how best to communicate with clients (Uzzi, 1997), and personal relationships grounded in the close interaction that occurs in the co-production of professional services (Granovetter, 1985;Larsson and Bowen, 1989). These investments in relationship-specific human and social capital provide relational advantages such as trust (Raffiee, 2017), structural advantages such as access to information (Burt 1992), and cognitive advantages such as shared representations and systems of meaning (Cicourel, 1973;Conner and Prahalad, 1996).…”